These strong increases are in line with an aggressive message from the European Central Bank and the acceleration of inflation in the United States.
Interest rates on government bonds continued to soar on Monday, with the French 10-year yield exceeding 2%, a level not seen since 2014, under the pressure of inflation which raised fears of severe monetary tightening on the part of central banks. “It’s a bit of a bloodbathon the sovereign debt market where investors are getting rid of their bonds, observes Aurélien Buffaut, director of bond management at Meeaschaert Amilton AM.
Yields soared in the wake of an aggressive message from the European Central Bank on Thursday and the acceleration of inflation in the United States on Friday, which made the market fear an even stronger monetary tightening than expected. The Frankfurt monetary institution confirmed last week that it would end its bond purchases in early July on the markets and that it would raise its rates in July by a quarter of a point, as expected, without ruling out a larger hike. in September if the inflation outlook persists or deteriorates.
SEE ALSO – Faced with “undesirable” inflation, the ECB initiates a historic rate hike
The rise in rates “harder than expected”
“The market believes that the rate hike will be harder than expected», explains Aurélien Buffaut. In the euro zone, the yield on the Bund (German 10-year borrowing rate, which refers) stood at 1.61%, a level not seen since 2014, just like that of France which amounted to 2, 22% around 2:50 p.m. GMT. “The end of ECB asset purchases will put pressure on the debts of eurozone countries, especially peripheral countries such as Italy“, observes Nicolas Forest, director of bond management at Candriam, interviewed by AFP.
The yield on the Italian loan exceeded 4%, a level dating back to the end of 2013.It is especially at the level of interest rate spreads that it is advisable to be vigilant in the euro zone: the difference between the 10-year rates of Germany and Italy reached 2.40% this morning, its highest level since May 2020, during the first wave of Covidwrites Alexandre Baradez, head of market analysis at IG France. A gap “still far from the stress levels reached during the debt crisis in the euro zone where this gap had exceeded 5% in 2011 and 2012“, tempers the expert. The prospect of a possible tightening of the monetary policy of the American central bank (Fed) at the end of its meeting, which is held on Tuesday and Wednesday, also pushed up the American rates to 10 years to a high for 11 years.
SEE ALSO – The war in Ukraine will weigh on global growth and push inflation above 8%, warns the OECD